Analyst raises Coca-Cola estimates on sales boost

An analyst on Monday raised estimates for Coca-Cola Co., saying the world's largest soft drink maker will see improving trends in its third quarter and less drag from foreign currency exchange.

The Atlanta-based company is due to announce its third-quarter earnings on Oct. 20.

UBS analyst Kaumil S. Gajrawala told clients in a note that findings by UBS analysts around the world showed improving trends in the U.S., India and other areas in the quarter.

U.S. consumers have been cutting back on their soft drink purchases and switching to healthier juices and teas. But Gajrawala said that consumers are going back to soft drinks as they trade down from more costly purchases to save money. He expects sales volume in the U.S. to improve from being down 1 percent to falling 0.4 percent, while pricing should be up 5 percent.

India's volumes should be up 20 percent, while Latin America should post a 5 percent gain. China is estimated to have a 10 percent boost in volumes. Weakness is still found in Russia and Eastern Europe, he said, as consumers trade down and cut their spending amid the recession.

The company had previously expected foreign currency woes to drag down sales between 12 percent and 14 percent, but it's not likely to be that high, the analyst wrote. Sales in foreign countries are hurt by a strong U.S. dollar once they are converted back to American dollars.

Gajrawala raised his target share price by $7 to $57, but maintained his "Neutral" rating on the stock, saying he prefers rival PepsiCo Inc.

He raised his fiscal third-quarter earnings per share estimate by 2 cents to 83 cents, 2 cents ahead of consensus, according to Thomson Reuters. He also raised his fiscal 2009 earnings per share estimate by 3 cents to $3.08. That's 2 cents ahead of consensus, according to Thomson.

Shares of Coca-Cola rose 41 cents to $55.06 in morning trading Monday.